Just last week I received Kansai Nerolac's Annual Report. I was impressed while I was going thru it. Lately I havent written on any particular company. I thought this one will be a good one.
This company exists in paint segment for almost 90 years. 70% of the shares are held by Kansai of Japan. Its second largest company in paints after Asian Paints in India. Renowned personalities like Dr. J.J. Irani and Noel Tata are part of the board of directors while J.J. Irani being the chairman of the company
Company has 74 sales locations with 5 plants from spread across India. While company has grown up by 26% it expects the home paint industry to grow by 22% in India because of urbanization. Besides home paints, company is well positioned in auto segment. They are partners with big names in auto industry. Lately they have implemented Business and IT Transformation using SAP across the board and management expects to see benefits in coming years.
The company closed the year with Rs 2493 Cr. with 206 Cr in net profit. The company declared Rs 10 dividend post bonus. (It gave bonus1:1 last year) Profits have increased more than 2 fold in last 2 years (100% in 2 years) 4 fold in 7 years.
With such a high growth rates and now implementation of new IT strategy, company is bound to grow more. There may be a slight dent on growth because of slowing down of auto segment but in long run, company will grow by leaps and bounds. Currently shares are priced at Rs 870/- with PE of 26. Compare market leaders like Asian Paints at PE of 37. If one has to compare Asian Paints and Nerolac, it has a room to grow by atleast 30% if not more. The growth in the segment will add separately.
Again compared to Asian Paints Nerolac is more investor friendly. They have issued bonus shares twice in last 6 years. Dividend yield of 1.2 on post bonus isnt bad. It should give decent returns in 3-4 years.
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